Friday morning brought the good news that, at least in general terms, the US economy continues to make progress in its attempts to recover from the impact of the Coronavirus. The Nonfarm Jobs Report from the BLS over-performed estimates, showing about 200,000 more jobs created than had been analyst’s forecasts. Additionally, the unemployment rate was a bit better than expected: 10.2% vs. the forecasted 10.5%. Still, that only drops the unemployed to a very ugly 16 million folks out of work.

The concept of ‘better than expected’ or ‘worse than expected’ are big factors in what drives markets, so the better than expected jobs report should have provided a boost to all of the major indexes this morning. But, hold on; there’s more.

It is important to keep in mind that the economic impact of the pandemic operates on more than one level. Of course, individuals are personally affected by the loss of a job or loss of hours and other factors but there is also the collective damage to the economy as a whole.

We often speak of liquidity in the markets and one form of that is analogous to the oil in your car’s engine. Adding liquidity to the markets injects that same liquidity into the economy. That may be necessary at times when liquidity is falling. If that oil falls below a certain point, the economy, like your engine, may seize and you will go no further.

Today in Washington, our politicians are telling us that they are working very hard to overcome their differences of opinion on how best to pass the next round of economic stimulus. We find it very hard to accept their offered sincerity at face value. Watching the blame-casting and finger-pointing is terribly frustrating for us and probably for you too. Checking the oil frequently is a good idea but, do we really need all these dipsticks?

The bottom-line question is ‘what will it take to cure the constipation?’ As it is so often in DC, things will finally move forward once the politicians run out of ways to make the lack of progress appear to be the fault of ‘the other guys’. There are only a handful of possible outcomes. Cnet has a pretty good piece today that explains what they are. You can find it here: https://www.cnet.com/personal-finance/congress-stimulus-deal-hanging-by-a-thread-what-happens-if-they-miss-todays-deadline/

Ron’s Market Minute — A Healthy Market?

A ‘healthy’ market is general considered to be one in which breadth is good — which means that most of the stocks in the market (or market index) are participating in the growth. An ‘unhealthy market’ is one in which breadth is weak- where only a small group of stocks or perhaps even just one sector is growing while the rest are not. With that in mind, have a look at the chart below which shows year-to-date performance for the top 20 stocks in the S&P 500 Index*. Overall, the year is mixed with eleven up and nine down.

Amazon is up over 70%, Apple is up over 50% and Microsoft is up over 30%. Facebook and Home Depot are dragging their feet but still with gains greater than 20%! As strong as the stock market seems, strength is clearly concentrated in a few stocks, and these few stocks are up big, (really big!)

The two worst performers year-to-date are Bank of America and JP Morgan. Both are down around 30% year-to-date and weighing on the Finance sector, which is the second weakest sector overall. Thus, as strong as the stock market seems, it is really a mixed bag out there. There are still some pockets of serious weakness in some key groups, such as banks. Techs are doing showing their muscle right now and the broader market is extremely reliant on this sector as it grows in size.

We continue to monitor the markets as the mid and short-term trends continue upward. After a surge from late March to May, stocks rested in June before continuing upward.

Further out, my concerns remain with the waning breadth, the two weakest months of the year upon us, and very strong pricing in gold and US Treasuries. Still, the July technical breakouts held and the medium-term indicators remain bullish. This is what really counts. I will adhere to this trend and these indicators until Ms. Market changes her mind.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

LFS-3194539-080720